Barriers to pension scheme participation in small- and medium-sized enterprises

Abstract

Large sections of the UK population are failing to make adequate provision for their retirement, and one area where provision is notably poor is among people working for small- and medium-sized businesses (SMEs). Information was gathered from interviews with individuals from a wide range of organisations active in the pensions market, for these companies to shed light on the particular barriers to pension scheme participation in this sector in which over 40 per cent of the working population is employed. It was found that many finance directors are sceptical of the benefits of providing pensions for their employees and deliberately structure their pension schemes to avoid high participation rates. It was also found that financial advisers and pension providers are reluctant to promote pensions in companies where they perceive the management to be unsupportive and where there is no clear profit margin. The authors suggest one way in which management could be motivated to encourage pension scheme participation among their employees.